Stocks and T-bonds

The Stock market is making a huge top. The bonds are starting to cave in, and today the 10 year T-note dropped under its 50-day moving average. The long T-bond sank right to its moving average. Sinking bonds and rising interest rates are the last thing the stock market wants to see. Let's say the whole situation is fluid, very, very fluid. And caution is the word.

The U.S. housing slump will weaken the economy more than previously forecast, prompting the Federal Reserve to reduce interest rates by June. Bernanke last week said housing is undergoing a "substantial correction'' that will lop a percentage point off growth in the second half of this year.